Special report:

The Iraq handover

Barely ready, not yet steady

America's remission of power in Iraq is, of necessity, much subtler than it seems

JUNE 30th has long been seen as a date of almost mystical significance for the future of Iraq. On that day, America will hand over to an interim government of Iraqis, and Paul Bremer, the American proconsul, will leave the country. Yet behind the symbolic toings and froings, how much will really change? And how much power will the Iraqis really have?

Iyad Allawi, a Baathist leader in Europe who plotted against Saddam Hussein in the 1990s, is the prime minister-designate. He is seen as tough; “our kind of bully”, as a State Department hand describes him. Under the temporary constitution, the Transitional Administrative Law (TAL), cabinet decisions are law, and decrees already in force, such as those that laid down a new press law or set up the independent regulator of state media and mobile phones, can be scrapped by cabinet order.

Mr Allawi's “caretaker” powers are supposed to expire after elections for a National Assembly in January 2005. Some wonder whether they will, especially if security fails to improve. On the eve of the handover the fighting intensified, with black-clad insurgents battling the police in two towns west and north of Baghdad.

Most Iraqis, however, seem relieved to have one of their own back in charge. According to a poll conducted by Baghdad's Centre for Research and Strategic Studies, only 2% of them consider the Americans liberators. And the sickening spate of car-bombings and assassinations has left them craving the return of a strongman. Baghdad's city council has called for martial law to be declared in the capital for six months. Many are demanding a curfew.

Mr Allawi's team want to be seen to be up to the job; this is not, they believe, a time for soft talk. The justice minister has called for the revival of the death penalty, the defence minister has promised personally to cut off rebels' hands and heads, and the interior minister has ordered his police into no-go areas such as Baghdad's weapons market. More daring policemen are issuing fines for driving offences for the first time since the war. Mr Allawi has also promised to reintegrate senior Baathists excised by Mr Bremer, and has announced the remobilisation of five of Iraq's disbanded army divisions to support the police. “Disbanding the Iraqi army was a big mistake,” he says. “We are fixing the mistakes of the Americans, aren't we?”

Baathists are understandably elated. Some are drawing historical parallels with the 1960s, when Baathists were overthrown in 1963 only to regain power in a coup five years later. “We're organising for the next,” says a former scribe of Mr Hussein's. Although the rebels' strike-rate remains high, with 45 attacks a day, it is growing less lethal for American soldiers (see chart). The car-bombings and decapitations, optimists suppose, may be a sign of weakness, not strength.

The prospect that the old regime may rear its head has given some Americans pause for thought. Officials of the outgoing coalition authority resist the idea that Iraqis, rather than multinational forces, should impose martial law. The latest UN Security Council resolution on Iraq, they insist, gives the American-led multinational force authority to use “all necessary measures”. Iraq's armed forces, it is understood, will be subject to the coalition's operational command, though the Iraqi government will take strategic decisions.

Comparisons with the brutality of the former regime are certainly premature. While Mr Hussein had 70 divisions, Mr Allawi will have a single armed division of 8,000 soldiers. In addition, he can call on a newly named National Guard, comprising 40,000 ill-trained local men. He will have no heavy weapons, and just 16 helicopters for transport and reconnaissance. His embryonic defence ministry, which still has no phone system, has unveiled a plan to send Iraq's army from house to house in the troubled Sunni towns west of Baghdad and the Shia towns south of it. But against an opposition heavily armed with mortars and rockets, government forces on their own will be out-gunned.

Mr Allawi will also have much to do elsewhere. The main arterial roads from Syria and Jordan through the desert to the capital fall in an area outside Baghdad's control, and the nine-kilometre stretch from Baghdad to its airport, known as Ambush Alley, remains Iraq's most dangerous road. American forces have handed two towns, Fallujah and Baquba, to their opponents after inconclusive battles.

Other forces are also seeking to carve out their zones. Hotheads in the Shammar tribe are threatening to go on the rampage. The Kurds, entrenched in the north, have been pushing ever deeper into the oil-rich town of Kirkuk to the south. The limits of central authority were revealed when, the day after ordering that all Iraq's militias be disbanded, Mr Allawi backtracked and said that the two Kurdish regional governments could keep their peshmerga militias.

Even in the capital, central authority has a small remit. Despite Mr Allawi's ban on militias, paramilitaries loyal to the Supreme Council for Islamic Revolution in Iraq (SCIRI), an Iranian-backed Shia group, took to the streets recently to protest against the burning to death of six drivers by Sunni extremists. Across the country the authorities claim that 500 courts are functioning, but even in the most elegant parts of Baghdad they have to compete with the roadside awnings of all-male sharia and tribal courts, known as fasls. Secularisation looks good on paper, but not on the streets. Under American pressure, women won 25% of ministries in the interim government and the Governing Council's Law 137, which imposed sharia law for personal affairs, was reversed. But honour crimes are again on the rise.

Towards elections

Mr Allawi can call on American forces for help, but will not want to look like a lackey. Unlike Mr Hussein, he will have to rely on co-option, not repression, to draw together Iraq's centrifugal forces. The effort has already begun. Under the banner of national reconciliation, a committee is preparing a list of 1,000 names to join a conference at the end of July, from whom will be drawn a 250-member National Council to monitor the government and—if it secures a two-thirds majority—veto cabinet orders. But enthusiasm has ebbed. Key groups—including the Muslim Scholars' Council, a body of anti-American Sunni clerics—have already announced a boycott. Fearing further rejection, the council has revoked its invitation to the most turbulent Shia cleric, Muqtada al-Sadr.

In the months before the January elections, prospective candidates (and the Allawi government, too) are keen to show themselves untainted by collaboration with the occupation. Some peculiar alignments are beginning to appear. Ahmed Chalabi, the fallen angel of the Pentagon's neo-cons, has put out feelers to run on a “Shia House” ticket with Mr Sadr, who holds sway over Baghdad's crowded Shia slums. Massoud Barzani, a Kurdish leader, is seeking out Sunni Arab allies among the large Jabour tribe. And merchants are rediscovering their tribal roots.

If all goes to plan, a new government will take office after the general election in January and will see a permanent constitution through the National Assembly to serve as the basis of general elections by the end of 2005. But it is by no means certain that the timetable will be kept to. In mid-June Kofi Annan, its secretary-general, announced that he was delaying the UN's return to Iraq until it was safer.

And what if Iraqis vote the “wrong” way, in America's view? Mr Bremer may have been loth to hold early local or national elections for fear that Islamists might win. The new interior minister is already muttering about the dangers of “democratic militants”.

Allawi's underpinnings

All this said, Mr Allawi has two assets that his rivals do not. His government controls the oil revenues, and is underwritten by a superpower. Despite the Americans' promises of a market economy, they are handing over a socialist centralised state with oil revenues delivered as subsidies, nationwide food rations and burgeoning public-sector salaries. Even workers at the industry ministry's 80 factories, idle because there is no electricity to power them, get their bonuses as usual.

All in good timeReuters

Most crucially, Mr Allawi is underpinned by a 150,000-strong multinational force, of whom all but around 17,000 are American. The award of a $293m contract to a British soldier of fortune, Tim Spicer, has also brought thousands of western and Asian mercenaries under America's wing and beyond the reach of Iraqi law.

The Americans say they are handing over a judiciary that is independent of the justice ministry. The innocuous-sounding Central Criminal Court, staffed by American-picked judges to try “fast-track” cases, is to return to the judicial fold after the handover. Already two members of the Governing Council have been summoned before the court. Many lawyers fear that after June 30th standards will slip again.

Saddam Hussein will be among the first of some 6,000 detainees to be transferred to Iraqi jurisdiction after the handover, say American officials, as soon as the sovereign government issues arrest warrants. But to ensure he does not escape, he is expected to stay physically in American custody while being legally in Iraq's, and the Americans now say they will sign an agreement to this effect with the Iraqi government. Some 1,300 detainees are due to be released by July 1st. But the other 4,000-5,000 will stay in American custody until the Iraqi authorities can guarantee due process and a secure court.

Mr Allawi has appealed to Arab and Muslim states to supply weapons in an attempt to circumvent American curbs on rearmament, and has proposed revamping the old regime's weapons (including a mothballed squadron of MIGs). But his armed forces remain dependent on American finance. In the 2004 budget, all but $300m of the $1.5 billion for military spending is provided by the United States. Western advisers at the defence ministry believe that, if the interim government seeks to accelerate the Americans' timetable for growth (three divisions by the end of the year), funds could be withheld.

The same strings apply to Mr Allawi's other ministries, which also depend on American aid for much of their capital budgets. Although all the ministries are now headed and staffed by Iraqis, some 150 mainly American advisers will continue to work from the same desks inside the Republican Palace as before the handover. (The British will “lead” in the finance and defence ministries, the Australians in the agriculture ministry.)

The UN resolution also binds Iraq to uphold deals already financed by the Americans from the country's oil revenues deposited in the Development Fund for Iraq (DFI). Over the course of the occupation, the Americans have already spent $11.3 billion of the $20.2 billion DFI revenues and have committed a further $4.6 billion, much of it in recent weeks. Hundreds of millions of dollars were used to hire western military companies to secure strategic sites, such as the national broadcasting centre, and keep them, for the time being, out of Iraqi control. British security firms have won contracts that give them control of access to both Baghdad International Airport and the port at Um Qasr.

America's armed forces rightly claim they have gone out of their way to relocate their largest camp in Iraq—housing 15,000 soldiers—in order to hand back Baghdad airport to Iraq's transport ministry. But the western companies, citing legal liability, say they will determine which Iraqis can go there. For now, the Americans will also continue to control access for airlines.

Many Iraqis feel that America is handing over not to them but to western contractors, who will be granted immunity from Iraqi law. And while jobs are parcelled out to such contractors, 2m out of Iraq's workforce of 7m remain jobless, fuelling the anger which feeds the insurgency. As of April, the Americans had created about 395,000 jobs; the Bush administration had promised 850,000.

Broken, but hopeful

The past year's financial blackout has set a poor standard for Iraq's new government to follow. Iraq's oil revenues will be overseen by the UN's international auditing and monitoring body, which can be expected to acquire greater muscle. Mr Bremer has also ordered an internal auditing system for Iraqis, with a commission for public integrity and inspector-generals appointed to each ministry. And he has appointed independent regulators to keep the politicians from meddling. These well-intentioned ideas may not result in virtue, all the same. Ministers appointed to their posts for seven months will have scant time to master their portfolios, and may opt to feather their beds while they can.

The changeover at the ministries has compounded Iraq's dislocation. The rudiments of a bureaucracy are in place, but the wrecks of Mr Hussein's vast government buildings still loom over the city. The stock exchange, meant to open in January, has yet to begin operations.

Much can be blamed on the rebels. Iraqis had been promised they would have 6,000MW of electricity by the start of the summer. Instead, thanks to attacks on General Electric and its Russian partners, they have just over 4,000MW. Attacks on pipelines in the northern and southern oilfields have reduced exports sharply (costing Iraq $1 billion, Mr Allawi says) and have cut supplies to power stations.

At times, it seems that America's own faith is wavering. The 3,000 staff billed to fill its embassy have been reduced to 1,000. And hardly any of the $18.4 billion in congressional money for Iraq's 2004 capital budget has arrived. Although administrators have earmarked $10 billion for projects, they have awarded only $3.2 billion, most of which will go for building military bases. Sub-contractors complain that the coalition's largest contractor, KBR, is months behind on payments.

Other aid donors—who pledged some $13 billion last November—have also held back for political as well as security reasons. This week, Iraq's president, Ghazi al-Yawar, complained that only 10% of Iraq's aid had arrived. France and Germany, for their part, are insisting on at least some debt repayments before they will return to operate in Iraq's post-war economy.

Meanwhile, ordinary Iraqis get their comfort where they can find it. In search of anything from a cure for their sick infants to marriage guidance, some of Baghdad's poor head up a squalid cul-de-sac to the door of a Sufi master's takiya, or house of worship. The master, Said Rifayi, offers them his spittle and his blessings, interspersed with curses which echo the insurgents' graffiti daubed on the walls. Once he advocated a personal jihad to correct the erring soul; now he preaches jihad to defend Islam, no matter how slim the odds.

After the prisoner-abuse scandal of Abu Ghraib, it is harder to portray America's presence to Iraqis as a force for good. In the summer heat, American soldiers have grown increasingly irritable. Hundreds of Iraqis are still hungry to avenge dead relatives and unfair detentions. Asked by diplomats whether in three years' time the fighting would be over, a senior American official expressed doubts.

Yet even America's greatest critics in Iraq feel some good has come out of the war. Where there was one megalomaniac in power, there is now a myriad of power-brokers. Eighteen television stations are about to take to the air in Baghdad alone, and Iraqis can try (though they often fail) to talk by mobile phone. A newspaper editor threatens to throw tomatoes at Mr Allawi's government if he fails to deliver, and fears no retribution. And nearly half of all Iraqis, according to the survey cited above, say they want America's forces to stay until after the January elections.